Key considerations when negotiating heads of terms for a commercial lease

When you’ve found the ideal commercial property it can be tempting to move in quickly, particularly if you feel that the agent or landlord is putting pressure on you to submit an offer. This could mean that you end up entering into a lease without being certain about what the terms are and whether the lease suits your business purposes.

What do you need to consider?

A lease is a long-term business relationship between landlord and tenant which means that it's vital to think carefully about exactly what’s on offer, particularly taking into account

the age and condition of the property, particularly considering how you intend to use it

your priorities and expectations, especially financial ones

your timescales

your business needs and plans

If you take adequate time to consider things carefully at this initial stage you will be better equipped to negotiate the terms of the lease and avoid potential disaster.

The importance of Heads of Terms/Heads of Agreement

A Heads of Agreement is an important document containing the basic provisions and lays down the foundation for the lease. The value of this process means that you have the opportunity to negotiate the terms of the lease before the Heads of Agreement is finalised. Once the heads of terms are passed to solicitors and professional costs are incurred, it will be harder to justify a re-negotiation of the terms (unless there is good reason).

Together with your legal representative you can

ensure that you understand the obligations and responsibilities of both parties

identify the risks and potential problems and, where relevant, try to minimise these

What lease terms can be negotiated?

Most lease terms can be negotiated but there are some essential terms which need special consideration including:

- the status of the lease and what protection you will have

- the exact obligations and responsibilities for repairing and maintaining the property, including service charges

- rent payment and reviews

- whether you can transfer (assign) the lease to somebody else if you need to.

What if Heads of Terms are not negotiated?

Once a lease is completed then you will be bound by the terms in the lease which means that failing to negotiate the lease can end up being a costly mistake.

Our solicitors in Bristol are very experienced at negotiating and drafting all types of commercial leases and would be delighted to help you. Whether you are looking at taking or offering a commercial lease, contact solicitor Janine Harris, Head of the Commercial Department on 0117 973 39 89 or email janineharris@amdsolicitors.com.

This article is provided for general information purposes only and represents our understanding of the relevant law and practice as at the date of uploading. This article should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.

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